If an influx of cash is just what your business needs to expand, angel investors (or angels for short) are one option that doesn’t require you to borrow money. Although financing that you don’t need to pay back can be beneficial, there’s still no such thing as a free lunch. Like any type of funding, angels have their pros and cons.
Funding in exchange for shares of your business
How angels work is simple – they invest into your business and receive shares for their money. The typical amount is $25,000 to $100,000, although it could be much higher depending on your business, its industry and the growth potential. It’s generally less than what you’d get from a venture capital firm, but this also means angels are a better option for small businesses that don’t need millions to grow.
An obvious advantage of angel investors is that you’re not expected to repay the investment, cutting down on your risk. In a worst-case scenario where your business goes under, you won’t be out that money or need to pay anything back like you would with a loan.
You can raise far more money through angels than you could through saving alone, making this funding method ideal for taking the next step with your business. Apple and Amazon are two of the major companies that owe much of their success to funding from angel investors.
Giving up a portion of your business isn’t something to take lightly, though. Angels typically require a solid amount of equity in your company. Make sure that the potential profits of expanding are worth what you’ll be sacrificing later.
Receiving funding from angel investors
Since angels are individual investors, receiving funding from them is much different than getting a loan from a financial institution. You need to put together a pitch and convince them Read More Here